EXHIBIT 2.1
AGREEMENT OF PURCHASE AND SALE OF ASSETS
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THIS AGREEMENT is entered into on February 15, 1999, by and among CHEMONICS
INTERNATIONAL, INC., a California corporation ("Chemonics"), WATCH-EDGE
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INTERNATIONAL, INC., an Arizona corporation ("Watch-Edge") (Chemonics and Watch-
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Edge are collectively referred to herein as the "Seller"), FIA INVESTMENT
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COMPANY L.L.C., an Arizona limited liability company, or its assignee
("Purchaser"), and XXXX XXXXXXXXX, solely in his capacity as responsible person
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("Xxxxxxxxx").
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RECITALS
Xxxxxxxxx was appointed as the responsible person to negotiate a sale
of Watch-Edge's stock in its wholly-owned non-debtor subsidiary, Chemonics, or,
alternatively, to structure on behalf of and with the consent of Watch-Edge, as
Chemonics' sole shareholder, and with the further consent of Board of Directors
of Chemonics, a sale of all of the assets of Chemonics itself, in either case
together with a sale of those assets of Watch-Edge which are used in conjunction
with and/or relate or contribute to Chemonics' business, pursuant to the
January 5, 1999, order of the United States Bankruptcy Court for the Southern
District of Texas entitled: Order on Motion to Sell Assets Free of Liens, Claims
and Encumbrances, Chemonics International, Inc. (the "Sale Order").
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In consideration of the terms and conditions contained herein, Purchaser
and Seller each hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
1.1 Purchase and Sale of Assets. Subject to the terms and conditions of
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this Agreement, Seller shall sell, transfer, assign, and deliver to Purchaser,
and Purchaser shall purchase and obtain from Seller, all of Seller's right,
title, and interest in and to the assets, contracts, leases and property of
Seller described herein that relate to or are used directly or indirectly in the
operation of the business of Chemonics, including, but not limited to, the
business as described in that certain Offering Memorandum (attached as Exhibit
"A") prepared by Seller (the "Business"), whether tangible, intangible, real,
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personal, or mixed and wherever located, including, but not limited to, those
specified below:
(1) All of the assets reflected on the Financial Statements (as defined
below) and all assets subsequently acquired, except for those assets disposed of
in the ordinary course of business consistent with past practices;
(2) All of Chemonics' furniture, improvements, fixtures, equipment, and
other personal property, including but not limited to, computer hardware and
software, peripherals, communication products and accessories and all other
supplies and materials;
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(3) All of Chemonics' cash, cash equivalents, deposits in transit, credits,
prepaid expenses, deferred charges, advance payments, security deposits, and
prepaid items and deposits, including any cash surrender value thereof;
(4) All of Chemonics' title, claims, and rights under contracts and
subcontracts, including consulting and sales contracts, accounts receivable,
notes, evidences of indebtedness, including, without limitation, contracts with
the Agency for International Development, the International Bank for
Reconstruction and Development, the United Nations, or any other international
assistance donor, foreign aid agency or regional development bank (including,
but not limited to, any payments relating to such contracts received either
prior to or after any assignment of such contract);
(5) All of Chemonics' federal, state, and foreign and common law
copyrights, service marks, trademarks, trade names (specifically, including,
without limitation, the name "Chemonics International, Inc." and "Chemonics"),
trade secrets, licenses, permits and royalty rights;
(6) All of Chemonics' securities, notes, bank accounts, certificates of
deposit, and bonds;
(7) All outstanding invoices, studies, reports, plans and information,
including customer lists, employee files, technical information sheets, and
other materials and data associated with, used or employed by Chemonics in the
Business;
(8) All of Chemonics' interests, claims, and rights, including all
deposits, under certain leases, including, but not limited to, all of Seller's
interests, claims, and rights under that certain lease for the premises at 0000
00xx Xx. XX, Xxxxxxxxxx, X.X. 00000;
(9) All of Chemonics' interest in any subsidiaries or any joint ventures or
other business arrangements with third parties;
(10) All of Watch-Edge's interests, claims, and rights relating to, or set
forth in, any computer lease or contract with Dell Computer as evidenced by such
companies' "UCC-1 filing";
(11) Any additional items of tangible or intangible property used or owned
by Chemonics which are not included above;
(12) All of Seller's right, title and interest in any assets or contracts
held by them that are used in the Business; and
(13) All of Chemonics' employment agreements.
For purposes of this Agreement, all of the property and assets described in
this Section 1.1 shall be referred to collectively as "Purchased Assets". Such
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sale shall be made free and
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clear of all liabilities, obligations, and encumbrances provided that Purchaser
shall assume those specific liabilities obligations, and encumbrances of Seller
specifically assumed by Purchaser under Section 1.2 hereof.
Notwithstanding anything to the contrary set forth above, Seller is not
hereby selling, and Purchaser is not hereby acquiring, any claims, causes of
action or rights Seller may have (i) against Xxxxxxx Xxxxx, the Xxxxxx Company,
Inc., or Xxxxx Xxxxxx, or the current or former officers, or directors, agents,
employees or professionals thereof or (ii) arising under title 11, of the United
States Code, or (iii) against Xxxxxx Xxxx, Xxxxxxxx X. Xxxxx, or any past or
present officer, director, employee or professional of Seller (the "Retained
Assets").
1.2 Assumed Liabilities. On the Closing Date (as hereinafter defined), in
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partial consideration of the transfer to the Purchaser of the Purchased Assets,
Purchaser shall assume and pay or discharge only those liabilities or
obligations (the "Assumed Liabilities") of Seller reflected on Schedule 1.2. It
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is expressly understood and agreed that Purchaser shall not be liable for any of
the obligations or liabilities of Seller of any kind or nature other than those
specifically assumed by Purchaser under this Section as specified on Schedule
1.2 hereto as they exist on the Closing Date and only up to the amounts
indicated on Schedule 1.2.
1.3 Liabilities Not Being Assumed. Except as set forth in Section 1.2,
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notwithstanding any other provision hereof or any schedule or exhibit hereto and
regardless of any disclosure to Purchaser, neither Purchaser nor any of its
Affiliates shall assume any liabilities, obligations or commitments, whether
fixed or contingent, known or unknown, matured or unmatured, executory or non-
executory of Seller, or any other person other than those obligations and
commitments comprising the Assumed Liabilities (collectively, the "Excluded
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Liabilities"). In particular, and subject to Section 7.15, the term "Excluded
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Liabilities" shall include, but not be limited to, the following: (i) any
liabilities owed by Seller to ERLY, Watch-Edge or their Affiliates (including
liabilities pursuant to tax sharing agreements, if any), (ii) any claims or
liabilities relating to any of the Xxxxxx Contingency, the Xxxxxx Contingency,
or any other litigation pending or threatened against Seller or the Purchased
Assets that is not disclosed in the Financial Statements, (iii) any arrangement,
liability to or claim resulting from, or made with, any investment banker, agent
or broker, including AIG and (iv) any Environmental Liabilities and Costs.
1.4 Purchase Price. On the terms and subject to the conditions set forth
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in this Agreement, Purchaser agrees to pay Seller the amounts set forth in this
Section 1.4 (the "Purchase Price"). The Purchase Price for the Purchased Assets
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is the total of (a) $1,500,000 in cash previously deposited in trust with
Xxxxxxxxx in connection with this transaction, (b) the Assumed Liabilities, (c)
$6,750,000 in cash or other immediately available funds which shall be delivered
at the Closing; and if not, the failure to do so shall be an event of default,
(d) satisfaction or release of all amounts owed by Seller to Purchaser, and (e)
satisfaction of all amounts owed by Seller to Xxxxxx'x Xxxx Milling Inc., such
amount being agreed on as the principal sum of $2,217,470.88, fees (if any),
plus accrued interest at the contract rate through the Closing Date.
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1.5 Characterization of Transaction; Allocation. Purchaser and Seller
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acknowledge and agree that, to the extent applicable, the purchase and sale
contemplated by this Agreement constitutes an "applicable asset acquisition"
within the meaning of Section 1060 of the Internal Revenue Code and the
corresponding provisions of state and local law. Purchaser shall deliver to
Seller a proposed allocation of the Purchase Price among the Purchased Assets
(the "Proposed Allocation") as soon as practicable after the Closing Date.
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Within twenty (20) days after the receipt of the Proposed Allocation, Seller
shall propose Seller's changes to the Proposed Allocation, if any. Any dispute
with respect to the Proposed Allocation that Purchaser and Seller, acting in
good faith, are thereafter unable to resolve within twenty (20) days shall be
conclusively resolved by an independent appraisal firm mutually agreed on by
Purchaser and Seller. The fees and expenses of such appraisal firm shall be
borne equally by Purchaser and Seller. Neither Purchaser nor Seller will take a
position inconsistent with the allocation of the Purchase Price as finally
determined pursuant to this Section 1.5; provided, however, that, if the
Internal Revenue Service ("IRS") takes a position with respect to either
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Purchaser or Seller that is inconsistent with such allocation, then either
Purchaser or Seller, as the case may be, may take a protective position adopting
the IRS' contention until the controversy has been resolved.
1.6 Consent of Third Parties. Notwithstanding anything to the contrary in
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this Agreement, this Agreement shall not constitute an agreement to assign or
transfer any Governmental Approval, instrument, contract, lease, permit or other
agreement or arrangement or any claim right or benefit arising thereunder or
resulting therefrom if an assignment or transfer or an attempt to make such an
assignment or transfer without the Consent of a third party would constitute a
breach or violation thereof or affect adversely the rights of Purchaser or
Seller thereunder; and any transfer or assignment to Purchaser by Seller of any
interest under any such instrument, contract, lease, permit or other agreement
or arrangement that requires the Consent of a third party shall be made subject
to such Consent or approval being obtained. In the event any such Consent or
approval is not obtained on or prior to the Closing Date, unless the parties
hereto shall otherwise agree, Seller, shall use reasonable efforts to obtain any
such approval or Consent after the Closing Date in any lawful arrangement to
provide that Purchaser shall receive the interests of Seller in the benefits
under any such instrument, contract, lease or permit or other agreement or
arrangement, including performance by Seller, as agent without requiring that
Purchaser provide additional consideration; except that Purchaser shall
undertake to pay or satisfy the corresponding liabilities for the enjoyment of
such benefit to the extent Purchaser would have been responsible therefor
hereunder if such Consent or approval had been obtained. This provision is
subject to the provisions of Paragraph 4.2b. Purchaser shall attempt to obtain
releases of Seller from any and all contracting entities releasing Seller from
responsibility under such contracts after the Closing Date. Subject to Section
4.2, nothing in this Section 1.6 shall be deemed a waiver by Purchaser of its
right to receive an effective assignment of all of the Purchased Assets nor
shall this Section 1.6 be deemed to constitute an agreement to exclude from the
Purchased Assets any assets set forth in Section 1.1.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER
As of the date hereof and as of the Closing Date, Sellers jointly and
severally represent,
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warrant, and agree as follows:
2.1 Authorization, etc. Seller has the corporate power and authority to
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execute and deliver this Agreement and to carry out and consent to the
transactions contemplated hereby. The execution and delivery by Seller of this
Agreement, and the consummation of the transactions contemplated hereby, have
been duly authorized by all requisite corporate action of Seller. This Agreement
is the legal, valid and binding obligation of Seller enforceable against Seller
in accordance with its terms. Seller specifically adopts all actions taken by
Xxxxxxxxx consistent with the Sale Order.
2.2 Corporate Existence. Seller is a corporation duly organized, validly
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existing, and in good standing under the laws of the jurisdiction of
incorporation with full corporate power and authority to carry on its business
as it is now conducted.
2.3 Financial Statements. Seller has delivered to Purchaser the unaudited
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balance sheets of Chemonics at October 31, 1998, and the related statements of
income for the seven months then ended, together with the related notes thereto
(collectively, the "Financial Statements"). With the exception of those matters
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listed on Schedule 2.4, the Financial Statements are materially complete and
correct and in accordance with the books of account and records of Chemonics,
and present fairly Chemonics' financial position. The Financial Statements have
been prepared in accordance with generally accepted accounting principles
consistently applied.
2.4 Absence of Certain Material Changes or Events. Since October 31, 1998
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(and with respect to subsections 10, 11 and 12 below, December 31, 1997), other
than that known by Xxxxxxxx X. Xxxxx ("Xxxxx") and Xxxxxx X. Xxxx ("Xxxx"), or
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as provided in any court order or this Agreement, there has not been any
material (i.e. in excess of the sum of $25,000.00 per occurrence or $100,000.00
in the aggregate):
(1) Except for the loan from Xxxxxx'x Rice Milling Inc. or other
transactions approved by the bankruptcy court, transaction by Chemonics outside
the ordinary course of business consistent with past practices;
(2) Adverse change in the financial condition, liabilities, assets,
business, or prospects of Chemonics;
(3) Increase in the salary or other compensation payable or to become
payable by Chemonics to any of its officers or directors or the declaration,
payment, or commitment or obligation of any kind for the payment, by Chemonics,
of a bonus or other additional salary or compensation to any such person;
(4) Amendment or termination of any contract, agreement, or license to
which Chemonics is a party, or by which it or any of its assets or properties
are subject, except in the ordinary course of business;
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(5) Waiver or release of any right or claim of Chemonics, except in
the ordinary course of business or except for any release in connection with
settlement of the Xxxxxx Contingency or the Xxxxxx Contingency;
(6) Declaration of or agreement to make any distribution of any assets
of any kind whatsoever;
(7) Citations, notices, or communications received for any violations
of any act, law, rule or regulation of any Governmental Authority;
(8) Claim incurred for damages or alleged damages for actual or
alleged negligence or other tort or breach of contract which is not fully
covered by insurance underwritten by responsible insurers;
(9) Sales, transfers, disposals of or agreements to sell, transfer or
otherwise dispose of any of the assets, properties or rights of Chemonics,
except in the ordinary course of business consistent with the past practices of
Chemonics;
(10) Change in the liabilities or obligations of Seller. Chemonics
has not incurred, and none of its assets or properties are subject to, any
liabilities or obligations (accrued, absolute, contingent, or otherwise
including but not limited to accrued but not yet payable tax liabilities)
whether or not such liabilities are normally shown or reflected on a balance
sheet prepared in a manner consistent with generally accepted accounting
principles, and Chemonics is not in default in respect of any term or condition
of any indebtedness or liability (except for defaults with respect to
indebtedness owed to Purchaser). There are no facts in existence on the date
hereof and known to Seller and not known to Xxxxx or Xxxx that might reasonably
serve as the basis for any material liabilities or obligations of Chemonics not
disclosed in this Agreement, Schedule 2.4, or the Financial Statements;
(11) Claims, actions, lawsuits, proceedings, arbitration issues,
unsettled workers compensation claims, or investigations pending or threatened
(except for the Xxxxxx Contingency) against or affecting Chemonics, the
Business, or any of its assets or properties, at law or in equity or before or
by any court or federal, state, municipal or other governmental department,
commission, board, agency, instrumentality, or unit;
(12) Contract, agreement, commitment and other instrument and
arrangement (whether written or oral), except as set forth in this Agreement,
any schedule hereto, or the Financial Statements, to which the Seller is a
party, or by which it, or any of its property is bound, which affects the
Purchased Assets, entered into by anyone other than Xxxxx or Xxxx, or any person
authorized to do so by the foregoing individuals, including but not limited to
asset purchase agreements and other acquisition or divestiture agreements,
leases, joint venture or partnership agreements, investment letters, financing
arrangements, escrow agreements, bonds, liens, pledges or other security
agreements, employment or consulting contracts, bonus, pension, group insurance
or similar employee benefit plans, insurance policies, or license agreements; or
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(13) Agreements to do any of the things described in the preceding
clauses (1) through (12).
2.5 Tax Matters. Except as set forth in the Financial Statements or known
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to Xxxxx and Xxxx and except as to the 1997 consolidated tax return, all
federal, state, county, local and other taxes, including without limitation,
income taxes, excise taxes, payroll taxes, corporate franchise taxes, sales,
and ad valorem taxes, due and payable by Chemonics on or before the date of this
Agreement have been paid, and Chemonics has filed on a timely basis all tax
returns and reports required to be filed by it with all applicable taxing
authorities and Seller does not expect any penalties to be assessed against
Chemonics with respect to such returns and reports. Seller is responsible for
filing all post-closing tax returns of Chemonics and for complying with all tax
related audits and inquiries relating to Chemonics. Nothing herein shall require
that Purchaser pay or assume any liability for such audit or as a result of such
audit. No assessments or deficiencies have been made against Chemonics and no
extensions of time are in effect for the assessment of deficiencies. Seller will
not cause or voluntarily permit a change in any method of accounting for tax
purposes during or applicable to Chemonics current tax year which would render
inaccurate, misleading, or incomplete the information concerning taxes set forth
in or referred to in this Section 2.5, or which would have an adverse effect on
Chemonics for any period ending on or before the Closing Date. A copy of the
current accounting information and software shall be delivered to Seller within
fifteen (15) days of Closing. Purchaser agrees to preserve for the benefit of
Seller a copy of all data on the accounting system(s). Subsequent to Closing,
Purchaser agrees to assist, cooperate and provide to Seller accounting
information in the event that Seller shall need such accounting information for
(1) tax matters involving Seller, or (2) to respond to any government, contract,
or IRS audits or inquiries, or (3) on any other matter reasonably requested by
Seller.
2.6 Title to Purchased Assets. Seller has and will transfer to Purchaser
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good and marketable fee simple to the Purchased Assets and upon the consummation
of the transactions contemplated hereby, Purchaser will acquire good and
marketable title to all of the Purchased Assets, free and clear of any liens or
encumbrances.
2.7 Environmental Matters.
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(1) Chemonics (and Watch-Edge solely as to any assets conveyed to
Purchaser hereunder) has complied and is currently in compliance with, all
Environmental Laws, and no action, suit, proceeding, investigation, charge,
complaint, notice, claim or demand has been filed, commenced or asserted against
Chemonics alleging any failure to comply, nor is there any basis upon which such
action, suit, proceeding, investigation, charge, complaint, notice, claim or
demand could be so filed, commenced or asserted.
(2) No work, repair, construction or capital expenditure is required
to be performed or expended by Chemonics as a result of any Environmental Law.
(3) Chemonics has no liability for damage under any Environmental Law
with respect to (i) any site, location or body of water (surface or sub-surface)
or (ii) any illness of or
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personal injury to, any employee or other individual.
(4) All properties and equipment, including the Purchased Assets,
occupied or used by Chemonics are and have been free of Hazardous Substances.
Section 2.8 Disputed Liabilities. Seller and Purchaser dispute whether
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the items set forth on Schedule 2.4 (the "Disputed Liabilities") are items which
Purchaser agreed to assume or pay under that certain letter agreement dated
January 15, 1999 (the "January 15 Letter").
ARTICLE 3
REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER
As of the date hereof and as of the Closing Date, the Purchaser represents,
warrants, and agrees as follows:
3.1 Authorization, etc. Purchaser has the power and authority to execute
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and deliver this Agreement and to carry out and consent to the transactions
contemplated hereby. The execution and delivery by Purchaser of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all requisite action of Purchaser. This Agreement is the legal,
valid and binding obligation of Purchaser enforceable against Purchaser in
accordance with its terms.
3.2 Existence. Purchaser is an Arizona limited liability company, duly
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authorized, validly existing and in good standing under the laws of Arizona with
full power and authority to carry on its business as it is now conducted.
3.3 Covenant. Purchaser agrees to timely perform and discharge all
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Assumed Liabilities and to perform all obligations of Seller and Purchaser under
any contracts or leases assumed or to be acquired hereunder.
ARTICLE 4
CONDITIONS PRECEDENT
4.1 Conditions to Obligations of Each Party. The obligations of the
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parties to consummate the transactions contemplated hereby shall be subject to
the fulfillment on or prior to the Closing Date of the following conditions:
4.1.a HSR Act Notification . In respect of any necessary
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notifications of Purchaser and Seller pursuant to the Xxxx-Xxxxx-Xxxxxx Anti-
Trust Improvements Act of 1976, as amended (the "HSRA"), the applicable waiting
period and any extensions thereof shall have expired or been terminated.
4.1.b No Injunction, etc. Consummation of the transactions
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contemplated hereby shall not have been restrained, enjoined or otherwise
prohibited by any applicable law, including any order, injunction, decree or
judgment of any court or other Governmental
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Authority.
4.1.c Section 363(m) Order. Entry of an order, which has not been
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stayed or the effectiveness thereof enjoined, under 11 U.S.C. (S) 363(m)
determining that Purchaser (or its assignee) and any person who participated in
submitting the bid set forth in the January 15 Letter is a "good faith"
purchaser as that term is utilized in Section 363(m), that the parties hereto
negotiated the terms of the sale authorized under the agreement in, and
conducted themselves at all relevant times in, good faith, that there is no
undisclosed agreement or other contract which affects or is related to the sale
or the consideration to be provided by Purchaser, that Purchaser (or its
assignee) is entitled to the protections set forth under Section 363(m), that
Xxxxxxxxx'x execution of this Agreement is approved, and that Xxxxxxxxx'x
actions in connection therewith are appropriate and approved.
4.1.d Free and Clear Order; Transfer Documents. Entry of an order,
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which has not been stayed or the effectiveness thereof enjoined, (i) declaring
that the sale of the assets of Chemonics acquired by Purchaser is free and clear
of all liens, claims, or encumbrances (subject only to Assumed Liabilities) and
(ii) providing for the assignment to Purchaser by Watch-Edge of leases or
executory contracts required to be conveyed or assigned hereunder. Seller shall
also have delivered to Purchaser at the Closing all documents, certificates and
agreements necessary to transfer to Purchaser good and marketable title to the
Purchased Assets, free and clear of any and all liens, claims, and encumbrances
thereon to the extent provided herein.
4.2 Conditions to Obligations of Purchaser. The obligations of Purchaser
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to consummate the transactions contemplated hereby shall be subject to the
fulfillment (or waiver by Purchaser, in its sole discretion) on or prior to the
Closing Date of the following additional conditions, which Seller agrees to use
reasonable good faith efforts to cause to be fulfilled:
4.2.a Representations; Performance. The representations and
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warranties of Seller contained herein shall be true and correct in all respects
on and as of the Closing Date as though made at that time. Seller shall have
duly performed and complied in all material respects with all agreements and
conditions required by this Agreement to be performed or complied with by it
prior to or on the Closing Date.
4.2.b Consents. Seller shall have obtained and shall have delivered
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to Purchaser copies of (i) all Governmental Approvals required to be obtained by
Seller in connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, and (ii) all Consents
necessary to be obtained in order to consummate the sale and transfer of the
Purchased Assets pursuant to this Agreement and the consummation of the
transactions contemplated hereby. Notwithstanding any other provision contained
in this Agreement, nothing shall require Seller to obtain any governmental or
third party consent to any assignment or transfer of the Purchased Assets as a
prerequisite to Purchaser's obligations herein. Any costs and expenses
associated with obtaining such consents after Closing shall be the sole
responsibility of Purchaser.
4.2.c Board of Directors Approval. This Agreement, and all
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transactions
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contemplated hereby, shall have been approved by the Board of Directors of
Chemonics at a duly called meeting ratifying Xx. Xxxxxxxxx'x actions and, as to
Chemonics, adopting them as the actions of the corporation and shall have been
approved by the Board of Directors of Watch-Edge in a similar manner.
4.2.d No Adverse Change. There shall have been no material adverse
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change in the financial condition, liabilities, assets, business, or prospects
of Chemonics since the date of this Agreement through and including the Closing.
4.3 Conditions to Obligations of Seller. The obligations of Seller to
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consummate the transactions contemplated hereby shall be subject to the
fulfillment (or waiver by Seller, in its sole discretion) on or prior to the
Closing Date of the following additional condition, which Purchaser agrees to
use reasonable good faith efforts to cause to be fulfilled.
4.3.a Representations; Performance, etc. The representations and
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warranties of Purchaser contained herein shall be true and correct in all
respects on and as of the Closing Date as though made at that time. Purchaser
has duly performed and complied in all material respects with all agreements and
conditions required by this Agreement to be performed or complied with by it
prior to or on the Closing Date.
ARTICLE 5
THE CLOSING
5.1 Closing. The Closing (and the payment of monies required hereunder)
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with respect to the transactions contemplated by this Agreement the ("Closing")
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shall take place at 3:00 p.m. local time on the earlier of (a) February 25, 1999
or (b) such other time as the parties hereto agree. The Closing shall occur at
the offices of Chemonics International, Inc. or at such other place as the
parties may agree. The day on which the Closing actually occurs is herein
sometimes referred to as the ("Closing Date").
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5.2 Seller's Obligations. At the Closing, Seller shall deliver to
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Purchaser the following:
(a) Instruments of transfer transferring to Purchaser all of Seller's
rights, title, and interest in and to the Purchased Assets, all in form and
substance satisfactory to Purchaser;
(b) All books, records, and other data relating to the Business (other
than its corporate records);
(c) Instruments of assignment and transfer of all other Purchased
Assets of every kind and description and wherever situated;
(d) Seller, at any time before or after the Closing, will execute,
acknowledge, and deliver any further deeds, assignments, conveyances, and other
assurances, documents and instruments of transfer, reasonably requested by
Purchaser, and will take any other action
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consistent with the terms of this Agreement that may reasonably be requested by
Purchaser, for the purpose of assigning, transferring, granting, conveying, and
confirming to Purchaser, or reducing to possession, any or all property to be
conveyed and transferred by this Agreement, and
(e) Evidence of the satisfaction of all requirements of Sections 4.1
and 4.2.
5.3 Purchaser's Obligations. At the Closing, Purchaser shall deliver to
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Seller the following:
(1) Delivery of $6,750,000 payable as provided in Section 1.4 hereof
and release to Seller of the $1,500,000.00 previously deposited by Purchaser;
(2) Satisfaction or release of the amount owed by Seller to Purchaser;
(3) Satisfaction of all amounts owed by Seller to Xxxxxx'x Xxxx
Milling Inc.; (principal amount limited to $2,217,470.88, plus accrued interest
at the base rate through the Closing Date);
(4) An assumption agreement pertaining to the Assumed Liabilities in
form and substance reasonably acceptable to Seller;
(5) A certificate of satisfaction or release which releases any claim
against the stock of either Chemonics or Watch-Edge which stock is held as
collateral by Purchaser; and
(6) To the extent Purchaser has the original of any such stock
certificates of Watch-Edge or Chemonics, same shall be returned to Seller along
with the certificate indicating the satisfaction of this indebtedness.
ARTICLE 6
POST CLOSING
6.1 Survival of Representations and Warranties. All covenants,
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agreements, representations, and warranties made hereunder or pursuant hereto or
in connection with the transactions contemplated hereby shall survive the
Closing.
6.2 Indemnification by Seller. Seller shall indemnify, defend, and hold
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harmless Purchaser and its successors and assigns from and against any and all
claims, demands, obligations, liabilities, losses, costs, damages, and expenses,
including interest, penalties, and reasonable attorneys' fees caused by or
arising out of
(1) any Excluded Liability;
(2) any breach or default in the performance by Seller of any covenant
or agreement of Seller contained in this Agreement;
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(3) any breach of warranty or materially inaccurate or erroneous
representation made by Seller herein;
(4) all Environmental Liabilities and Costs arising out of the
Seller's operations or its business prior to the Closing Date; and/or
(5) any liability arising out of any and all actions, suits,
proceedings, claims, demands, judgments, costs, and expenses incident to any of
the foregoing.
Purchaser and its successors and assigns shall promptly notify Seller of
any such liability, breach of warranty, inaccuracy, misrepresentation, or any
other claim arising under the foregoing indemnification provision. Seller may
contest and defend in good faith any claim of third parties covered by this
Section, provided such contest is made without cost or prejudice to Purchaser,
and provided that within thirty (30) days of Seller's receipt of notice of such
claim Seller notifies Purchaser of its desire to defend and contest such claim.
Any allowed claim of Purchaser under Section 6.2 hereof shall be considered and
deemed to be an administrative claim in the Watch-Edge and to, the extent
applicable, Erly Industries, Inc. bankruptcy case and provided for in any plan
or, in the event the case is converted, in any subsequently converted case under
Chapter 7 of the Bankruptcy Code.
6.3 Indemnification by Purchaser. Purchaser agrees to indemnify and hold
----------------------------
harmless Seller against, and in respect of, any and all claims, losses,
expenses, costs, obligations, and liabilities Seller may incur by reason of (i)
Purchaser's material breach of any covenant or agreement made by Purchaser in or
pursuant to this Agreement, or (ii) the material inaccuracy of any
representation or warranty made by Purchaser in or pursuant to this Agreement.
ARTICLE 7
MISCELLANEOUS
7.1 Definitions. The terms defined in this Section 7.1, whenever used in
-----------
this Agreement, shall have the respective meanings indicted below for all
purposes of this Agreement.
Affiliate: of (a) any Person means any other Person that directly or
indirectly through one or more intermediaries, controls, is controlled by, or is
under direct or indirect common control with, such first Person and (b) the
Seller includes any Affiliate as defined in clause (a) above. For purposes of
this definition, the term "control" (including the correlative meanings of the
terms "controls"- "controlled by" and "under common control with"), as used with
respect to any Person (including Seller), shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management
policies of such Person, whether through the ownership of voting securities, by
contract or credit arrangement, as trustee or executor, or otherwise.
Consent: any consent, approval, authorization, waiver, permit, grant,
franchise,
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concession, agreement, license, exemption or order of, registration,
certificate, declaration or firms with, or report or notice to, any Person,
including but not limited to any Governmental Authority.
Environmental Laws: all applicable laws relating to the protection of
the environment, to human health and safety, or to any emission, discharge,
generation, processing, storage, holding, abatement, existence, release,
threatened release or transportation of any Hazardous Substances, including,
without limitation, (i) the Comprehensive Environmental Response, Compensation
and Liability Act, the Resource Conservation and Recovery Act, and the
Occupational Safety and Health Act, (ii) all other requirements pertaining to
reporting, licensing, permitting, investigation or remediation of emissions,
discharges, releases or threatened releases of Hazardous Substances into the
air, surface water, ground water or land, or relating to the manufacture,
processing, distribution, use, sale, treatment, receipt, storage, disposal,
transport or handling of Hazardous Substances, and (iii) all other requirements
pertaining to the protection of the health and safety of employees or the
public.
Environmental Liabilities and Costs: all losses, whether direct or
indirect, known or unknown, current or potential, past, present or future,
imposed by, under or pursuant to Environmental Laws, including, without
limitation, all losses related to remedial actions, and all fees, disbursements
and expenses of counsel, experts, personnel, and consultants based on, arising
out of, or otherwise in respect of (i) the ownership or operation of the Seller,
the Business, or any real properties, assets, equipment, or facilities, by the
Seller, or any of its predecessors or Affiliates; (ii) the environmental
conditions, whether known or unknown, existing on the Closing Date on, under,
above, or about any real properties, assets, equipment, or facilities currently
or previously owned, leased, or operated by the Seller, or any of its
predecessors or Affiliates; and (iii) expenditures necessary to cause any aspect
of the Seller's business to be in compliance with. any and all requirements of
Environmental Laws as of the Closing Date, including, without limitation, all
environmental permits, licenses, registrations, certificates or otherwise issued
under or pursuant to such Environmental Laws, and reasonably necessary to make
full economic use of any leased real property.
Governmental Approval: any Consent of, with or from any Governmental
Authority.
Governmental Authority: any nation or government, any state or other
political subdivision thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
including, without limitation, any government authority, agency, department,
board, commission or instrumentality of the United States, any State of the
United States or any political subdivision thereof, and any tribunal or
arbitrator(s) of competent jurisdiction, and any self-regulatory organization.
Hazardous Substances: any substance that: (i) is or contains asbestos,
urea formaldehyde foam insulation, polychlorinated biphenyls, petroleum or
petroleum derived substances or wastes, radon gas or related materials (ii)
requires investigation, removal or remediation under any Environmental Law, or
is defined, listed or identified as a "hazardous
13
waste" - or "hazardous substance" - thereunder, or (iii) is toxic, explosive,
corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic, or
otherwise hazardous and is regulated by any Governmental Authority or
Environmental Law.
Xxxxxx Contingency: means the case entitled Xxxxx Xxxxxx v. Chemonics
-------------------------
International, Inc., et al, originally filed in the Superior Court of the State
---------------------------
of California, County of Los Angeles, Case No. B0198654 and subsequently removed
to the United States District Court, Southern District of California and that
certain case entitled Xxxxx Xxxxxx v. Xxxxxx Xxxx and Xxxxxxxx X. Xxxxx, filed
-------------------------------------------------
as C.A. No. 0009467-98 in the Superior Court for the District of Columbia, or
any lawsuit, claim, or cause of action relating thereto asserting, as a basis
for such claim or suit, substantially similar facts.
Person: any natural person, firm, partnership, association,
corporation, company, limited liability company, limited partnership, trust,
business trust, Governmental Authority or other entity.
Tax or Taxes: any federal, state, provincial, local, foreign or other
income, alternative, minimum, accumulated earnings, personal holding company,
franchise, capital stock, net worth, capital, profits, windfall profits, gross
receipts, value added, sales, use, goods and services, excise, customs duties,
transfer, conveyance, mortgage, registration, stamp, documentary, recording,
premium, severance, environmental (including taxes under Section 59A of the
Internal Revenue Code of 1986, as amended), real property, personal property, ad
valorem, intangibles, rent, occupancy, license, occupational, employment,
unemployment insurance, social security, disability, workers' compensation,
payroll, health care, withholding, estimated or other tax, duty or other
governmental charge or assessment or deficiencies thereof (including all
interest and penalties thereon and additions thereto whether disputed or not).
Xxxxxx Contingency: means the Settlement Agreement among Xxxxxxx
Xxxxx, Xxxxxx Company, Inc. and Chemonics Industries, Inc.
7.2 Expenses. Seller and Purchaser shall each pay its own expenses
--------
incident to the negotiation, preparation, and carrying out of this Agreement and
the consummation of the transactions contemplated hereby, whether or not the
transactions contemplated hereby shall be consummated; provided, however, that
Purchaser shall be solely responsible for the cost of any filing pursuant to the
HSR Act or the cost associated with compliance with any applicable bulk sales or
similar law in connection with the transactions contemplated hereby. Neither
Seller nor Purchaser has employed or engaged a broker with respect to this
transaction.
7.3 Notices. All notices, requests, consents, and other communications
-------
hereunder shall be in writing and shall be deemed to have been delivered on the
date personally delivered or on the date mailed first class certified mail,
postage prepaid, if addressed as follows:
If to Seller, to: If to Purchaser, to:
Xx. Xxxxxxx Xxxxxx, Chairman FIA Investment Company L.L.C.
ERLY Industries, Inc. 0000 Xxxx Xxxxxx Xxxxx
14
P. O. Xxx 000 Xxxxxxx, Xxxxxxx 00000-0000
Xxxxx Xxxxx, Xxxxxxxxx 00000 Attention Xxxxx Xxxxxxxx
Fax: (000) 000-0000 Fax: (000) 000-0000
Copies to: Copies to:
Xxxx Xxxxx & Xxxxx Xxxxx Xxxx Xxxxx
Attorneys for Watch-Edge International Xxxxx & Xxxxxx L.L.P.
Xxxxxxx & Xxxxxx, Incorporated Xxx Xxxxx Xxxxxx Xxxxxx
745 East Mulberry, Suite 900 Suite 1500
San Antonio, Texas 78212 Xxxxxx, Xxxxxxx 00000-0000
Fax: (000) 000-0000 Fax: (000) 000-0000
Xxxxxxx Xxxxxxxxxx Xxxxx X. Xxxxx
Attorney for ERLY Industries, Inc. Attorney for Xxxx Xxxxx & Xxxxxx Xxxx
American Bank Plaza Xxxxxxx Xxxxxx & Green PC
000 Xxxxx Xxxxxxxxx , Xxxxx 000 1227 25th Street, NW
Corpus Christi, Texas 78475 Xxxxxxxxxx, X.X. 00000
Fax: (000) 000-0000 Fax: (000) 000-0000
Xxxx Xxxxxxxxxxx & Xxxxxx Xxxxxxx Xxxxxx X. Xxxxxxx
Attorneys for ERLY Creditors Committee Wilkes, Artis, Xxxxxxx & Xxxx Charter
Xxxxxx & Xxxx Suite 1100
1717 Main Suite 2800 1666 K Street N.W.
Dallas, Texas 75201 Xxxxxxxxxx, X.X. 00000
Fax: (000) 000-0000 Fax: (000) 000-0000
Any party may change its address for purposes of this Section by giving the
other party written notice of the new address in the manner set forth above.
7.4 Costs. If any legal action or other proceeding is brought for the
-----
enforcement of this Agreement, or because of an alleged dispute, breach,
default, or misrepresentation in connection with any of the provisions of this
Agreement, the successful or prevailing party or parties shall be entitled to
recover reasonable attorneys' fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it or they may be entitled.
7.5 Assignment. This Agreement may be assigned by Purchaser to any
----------
Affiliate of Purchaser without the consent of the Seller. For purposes of this
section, it is expressly agreed that Purchaser intends to create a new company
whose shareholders will include the current equity holders of Purchaser and
Xxxxx and Xxxx to accept the Purchased Assets and that such entity will be
considered an Affiliate of Purchaser. Any such assignee shall assume all
obligations of Purchaser hereunder, including, but not limited to, any indemnity
hereunder.
7.6 Entire Agreement. This Agreement and the schedules, exhibits,
----------------
certificates, and documents referred to herein constitute the entire agreement
of the parties hereto, and supersede all prior understandings with respect to
the subject matter hereof. All schedules and exhibits
15
attached to this Agreement are deemed to be fully incorporated herein by this
reference for all purposes, as though fully set forth at length herein.
7.7 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, but all of which shall
constitute the same instrument.
7.8 Governing Law. This Agreement shall be construed in accordance with,
-------------
and governed by, the laws of the State of Arizona.
7.9 Responsible Person. Xxxxxxxxx, solely in his capacity as responsible
------------------
person, is executing this Agreement pursuant to the Order on Motion to Sell
Assets Free of Liens, Claims, and Encumbrances: Chemonics International, Inc.,
entered on January 5, 1999, by the United States Bankruptcy Court for the
Southern District of Texas, Corpus Christi Division, in the case captioned In
re: Watch-Edge International. Inc., Case No. 98-21895.
7.10 Xxxxx and Xxxx. The parties acknowledge and consent to the
--------------
participation, as shareholders and officers of Purchaser's assignee, of Xxxxx
and Xxxx and to their resignations effective on the Closing Date from their
positions as officers and directors of Chemonics and Watch-Edge.
7.11 Releases. Effective as of the Closing, Chemonics, Watch-Edge, ERLY
--------
Industries, Inc. (on behalf of themselves, their estate, and any subsequently
appointed Chapter 7 trustee) and each of their Affiliates, and to the maximum
extent permitted under law, their insiders, officers, directors, managers,
members, principals, insurers, professionals and agents, and their respective
successors and assigns, hereby irrevocably and forever release, acquit and
discharge each of Purchaser, Xxxxx X. Xxxxxxxx, and, to the maximum- extent
permitted under law, their present Affiliates, insiders, officers, directors,
managers, members, principals, insurers, professionals and agents, and their
respective successors and assigns, from any and all rights, liabilities, claims,
contract rights, obligations, offsets, suits, demands, debts and grievances of
any kind, whether known or unknown, contingent or not, in any way arising out
of, set forth in, or related to (i) any offer made to acquire any assets of
Chemonics or Watch-Edge, (ii) that certain Revolving Credit and Security
Agreement, dated May 30, 1996, (iii) that certain Credit and Security Agreement,
dated as of November 30, 1998, and (iv) any action, inaction, omission, order or
agreement relating thereto, except to the extent expressly set forth herein; all
parties hereto having agreed that the obligation of Purchaser expressly set
forth herein shall be the sole obligations Purchaser has to Seller, provided,
however, that nothing contained in this provision shall constitute a release of
any current or former insider, officer or director of either Chemonics or Watch-
Edge.
7.12 Releases. Effective as of the Closing, Purchaser, Xxxxx X. Xxxxxxxx,
--------
and each of their Affiliates, and to the maximum extent permitted under law,
their insiders, officers, directors, managers, members, principals, insurers,
professionals and agents, and their respective successors and assigns, hereby
irrevocably and forever release, acquit and discharge each of Chemonics, Watch-
Edge, ERLY Industries, Inc., their Affiliates, Xxxx Xxxxxxxxx, as Responsible
Person, and, to the maximum extent permitted under law, their insiders,
officers,
16
directors, managers, members, principals, insurers, professionals and agents,
and their respective successors and assigns from any and all rights,
liabilities, claims, contract rights, obligations, offsets, suits, demands,
debts and grievances of any kind, whether known or unknown, contingent or not,
in any way arising out of, set forth in, or related to (i) any offer made to
acquire any assets of Chemonics or Watch-Edge, (ii) that certain Revolving
Credit and Security Agreement, dated May 30, 1996, (iii) that certain Credit and
Security Agreement, dated as of November 30, 1998, and (iv) order or agreement
relating thereto, except to the extent expressly set forth herein (including,
expressly, the indemnification obligations of Seller herein); all parties hereto
having agreed that the obligation of Seller expressly set forth herein shall be
the sole obligations Seller has to Purchaser.
7.13 Jurisdiction. The United States Bankruptcy Court for the Southern
------------
District of Texas, Corpus Christi Division, shall have jurisdiction to resolve
any disputes arising hereunder.
7.14 Conveyance of Stock. Seller hereby agrees, that for no additional
-------------------
consideration, Purchaser shall have the option to acquire all of the outstanding
stock of Chemonics for the sum of One Dollar ($1.00). The parties hereto agree
that such purchase price will be fair and adequate consideration therefore.
This option will expire on September 1, 1999. The parties acknowledge and agree
that Watch-Edge shall have the right to take an assignment and conveyance of the
Retained Assets and the Purchase Price prior to the closing of the conveyance of
the outstanding stock of Chemonics to Purchaser pursuant to the option.
7.15 Disputed Liabilities. The obligation of Purchaser to pay Seller the
--------------------
Disputed Liabilities under the January 15 Letter shall be determined by (i) an
arbitrator selected by the parties (to the extent the parties can so agree) or
(ii) upon entry of a final order of the Bankruptcy Court. Within ten (10) days
(i) of the date of the arbitrator's decision or, if applicable, (ii) the entry
of a final order as set forth above, Purchaser shall pay to Seller such amounts
that are determined to be due, if any.
7.16 No Personal Liability. The individual signatories hereto shall have
---------------------
no personal liability hereunder based solely on their execution hereof.
7.17 Successors. This agreement shall inure to the benefit of any
----------
successors-in-interest to the parties hereto.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
SELLER: PURCHASER
CHEMONICS INTERNATIONAL, INC. FIA INVESTMENT COMPANY L.L.C.
/s/ XXXXXXX X. XXXXXX /s/ XXXXX X. XXXXXXXX
---------------------------- -------------------------------
By: Xxxxxxx Xxxxxx, Chairman By: Xxxxx X. Xxxxxxxx, Member Manager
Duly Authorized Duly Authorized
/s/ XXXX XXXXXXXXX
----------------------------
By: Xxxx Xxxxxxxxx,
Solely in his capacity as Responsible Person
without warranties or representations
000-000-0000, Ext. 12; fax 000-000-0000.
000 X. Xxxxxxxxxx, Xxxxx 0000
Xxxxxx Xxxxxxx, XX 00000
WATCH-EDGE INTERNATIONAL, INC. ERLY Industries, Inc.
/s/ XXXXXXX X. XXXXXX /s/ XXXXXXX X. XXXXXX
---------------------------- --------------------------------
By: Xxxxxxx Xxxxxx, Chairman By: Xxxxxxx Xxxxxx, Chairman
Duly Authorized Duly Authorized
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SCHEDULE 1.2
------------
(ASSUMED LIABILITIES)
Purchaser shall assume and pay only the liabilities (to the extent they remain
due and owing) listed on this Schedule 1.2 plus any additional liabilities of
Chemonics which arose or arise between October 31, 1998 and Closing in the
normal course of business.
1. Accounts Payable $4,818,083.00(l)
2. Note Payable to CIB $1,068,356.00
3. Accrued Payroll and $2,180,550.00(l)
other current liabilities
4. Profit Sharing Reserve $ 250,000.00
5. Xxxxxxxx in Excess of Cost $ 348,110.00
6. Deferred Rent $1,227,801.00
Total Assumed Liabilities $9,892,902.00
Notes
(1) A detailed list of accounts payable and accruals is attached.
(2) The amounts set forth in items 1-6 above are not Disputed Liabilities.
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SCHEDULE 2.4
------------
(DISPUTED LIABILITIES)
1. All accrued unpaid management fees at the rate of $40,000.00 per month.
Prior to October 19, 1998 Included in Item No. 4 below
October 1998 $ 40,000.00
November 1998 $ 40,000.00
February 1999 $ 40,000.00
-----------
Subtotal $120,000.00
[It is our understanding that December 1998
and January 1999 have been paid.]
2. Fees owed to Xxxxxxxxx for loan brokerage: $ 20,000.00
3. Unreimbursed Fees for Director's
Meetings, travel, etc. No more than $ 15,000.00
4. Pre-petition intercompany
receivables on the ERLY books
and records from Watch-Edge
not on the books and records
of Chemonics Approx. $232,000.00
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TOTAL: $387,000.00
===========
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